The parties’ arbitration agreement specifically excluded disputes arising from “the
exercise of any self-help remedies (including repossession and setoff rights).” Franklin Resp.,
Ex. F. at p. 2. Franklin contends his exercise of the right to rescission is not subject to arbitration
because it is a self-help remedy. Option One asserts rescission is not a self-help remedy and was
not included in the arbitration exception. Specifically, Option One argues “[A]side from the fact
that ‘rescission’ could not, in common usage, be considered to be a form of ‘self-help,’ the
Agreement itself does not include rescission among the list of remedies excluded from the
Agreement’s scope.” Option One Reply at p. 3. This argument fails for two reasons. First, the
agreement excluded “any” self-help remedies from arbitration. The fact that repossession and
setoff rights were listed as examples does not mean they were the only self-help remedies barred
from arbitration. Second, rescission is considered a self-help remedy. Clay v. Johnson, 77
F.Supp.2d 879, 888 (N.D. Il. 1999) (actions taken pursuant to the TILA rescission provision are
self-help remedies). Accordingly, the dispute at issue was specifically excluded from the

arbitration agreement.!

'The parties’ arguments pertaining to attorneys’ fees, the enforceability of the arbitration
agreement, prohibitive costs, and bias of the arbitrator are moot.

4.


transaction because they exercised in good faith rights under the Consumer Credit Protection Act
(“CCPA”). 15 U.S.C. § 1691(a)(3). TILA and HOEPA are part of the CCPA.

Franklin bases his ECOA claim on the fact that the arbitration agreement contains a
waiver of the borrower’s right to recover attorney’s fees and litigation expenses. Specifically,
Franklin asserts that since those who obtain high-interest and high-fee mortgages are typically
indigent and unable to afford an attorney, waiving such fees is equivalent to an advance waiver of
their TILA and HOEPA rights. Second Am. Cmplt. at { 33.

For purposes of this motion to amend, the court assumes the arbitration agreement
required Franklin to waive his right to recover attorney’s fees and litigation expenses. Even with
this assumption, Franklin cannot prevail on his ECOA claim. Franklin does not allege that he
exercised his right by voicing objections prior to signing the loan and arbitration agreements.
Moreover, he fails to allege discrimination. He does not suggest Hartland refused to extend the
desired loan or gave him a loan on less favorable terms based on any exercise of his TILA or
HOEPA rights. In fact, the complaint alleges that Franklin received the loan. Franklin has failed
to state a claim under the ECOA. Bowen vy. First Family Financial Services, Inc., 233 F.3d 1331,
1335-1336 (11" Cir. 2000). Accordingly, allowing Franklin to amend his complaint for a second
time would be futile.

Il. Motion to compel arbitration

There is a liberal federal policy favoring arbitration agreements. Green Tree Financial

Corp. v. Alabama, 121 8.Ct. 513, 522 (2000). The party opposing arbitration bears the burden of

proving that the claims at issue should not be subject to arbitration. Id.


CONCLUSION
Option One’s motion to compel arbitration is denied. Franklin’s motion to amend the

complaint is denied.

ENTER:

Brqrensl3, Orkin

Suzanne B/Conlon
United States District Judge

June 18, 2001



¥

Minde Order Form (06197)

United States District Court, Northern District of Illinois

Name of Assigned Judge Sitting Judge if Other
or Magistrate Judge Suzanne B. Conlon than Assigned Judge

CASE NUMBER 01C 2041 DATE 6/18/2001

CASE Brian Franklin vs. Hartland Mortgage Centers, Inc

TITLE

[In the following box (a) indicate the party filing the motion, ¢.g., plaintiff, defendant, 3rd party plaintiff, and (b) state briefly the nature

MOTION: of the motion being presented.]
DOCKET ENTRY:
qd) a Filed motion of [ use listing in “Motion” box above.]

(2) Oo Brief in support of motion due
(3) im Answer brief to motion due___. Reply to answer brief due__.
(4) ia) Ruling/Hearingon__—_—sset for____att
(5) Oo Status hearing[held/continued to] [set for/re-set for] on setfor_—at_
(6) oO Pretrial conference[held/continued to] [set for/re-set for] on setfor ss at_—
1) o Trial[set for/re-set for] on__at
(8) o (Bench/Jury trial] [Hearing] held/continued to__at
(9) Oo This case is dismissed [with/without] prejudice and without costs[by/agreement/pursuant to}
COFRCP4(m) ClGeneral Rule21 COFRCP41(a)(1) CM FRCP41(a)(2).
ao) [Other docket entry] Option One’s motion to compel arbitration [20-1] is denied. Franklin’s
motion to amend the complaint [24-1] is denied. Option One is directed to answer the amended complaint
by 6/29/01. ENTER MEMORANDUM OPINION AND ORDER.
Qwennd 8. Croton
MAs .
dl) @ [For further detail see order (on reverse side ofSttached 16) the original minute order.]

No notices required, advised in open court.  Doeiin

Number

No notices required. ;
number of notices.

NZ 8 20

date docketed

VY | Notices maited by judge’s staff.

Notified counsel by telephone.

Docketing to mail notices.
Mail AO 450 form. CN)

Ps

Copy to judge/magistrate judge. ci

gy JUN 27 PH? 48

courtroom
sb deputy’s
initials

Date/time received in

central Clerk’s Office nailing deputy initials\



IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS

EASTERN DIVISION

BRIAN FRANKLIN, )

)

Plaintiff, ) No. 01 C 2041
)
v. ) Suzanne B. Conlon, Judge

)
HARTLAND MORTGAGE CENTERS, INC., )
and OPTION ONE MORTGAGE ) 7)
CORPORATION, ) Ole:

My Meh LD
Defendant. 2

$209,

MEMORANDUM OPINION AND ORDER

Brian Franklin (“Franklin”) sues Hartland Mortgage Centers, Inc. (“Hartland”) and Option
One Mortgage Corporation (“Option One”) for violations of the Truth in Lending Act (“TILA”), 15
U.S.C. § 1601 ef seq., as amended by the Home Owners Equity Protection Act (““HOEPA”), 15
U.S.C. §§ 1602(aa) and 1639, and implementing Federal Reserve Board Regulation Z, 12 C.F.R. §
226. Option one moves to compel arbitration. Franklin moves to file a second amended complaint,
pursuant to Fed.R.Civ. P. 15(a).

BACKGROUND

On March 31", 2000, Franklin obtained a loan from Hartland for the purpose of
refinancing a prior mortgage loan on his residence. The mortgage was subsequently assigned to
Option One. After the loan closing, Franklin allegedly learned that Hartland violated TILA by
providing inaccurate information about the loan terms, failing to make required disclosures, and

imposing an improper prepayment penalty. On March 22, 2001, Franklin notified Hartland that


he was exercising his TILA right to rescind all security interests the company might have with his
property. The parties dispute whether the loan still exists.

At the time of the loan transaction, the parties agreed to arbitrate any disputes between
them, subject to several exceptions. One exception was for disputes arising from the exercise of
self-help remedies. Franklin Response (“Franklin Resp.”), Ex. F. at p. 1. In addition, the
agreement included a provision stating that the parties “shall each bear its own costs and
expenses, including attorney’s fees, that the party may incur with respect to arbitration.” Jd. at p.
2.

DISCUSSION
IL Motion to amend

Leave to amend pleadings “shall be freely given when justice so requires.” Fed.R.Civ.P.
15(a). “However, leave to amend is inappropriate where there is undue delay, bad faith, dilatory
motive on the part of the movant, repeated failure to cure deficiencies by amendments previously
allowed, undue prejudice to the opposing party . . . or futility of the amendment.” Feldman vy.
American Memorial Life Insurance Co., 196 F.3d 783, 793 (7 Cir. 1999) (internal quotes and
citations omitted). An amendment is futile when it cannot withstand a motion to dismiss. Bower
v, Jones, 978 F.2d 1004, 1008 (7" Cir. 1992).

Franklin seeks to amend his complaint to add a claim for violations of the Equal Credit
Opportunity Act (“ECOA”). Option One contends Franklin’s motion to amend should be denied
because the amendments could not survive a motion to dismiss. To state a claim under the

ECOA, plaintiffs must allege that a creditor discriminated against them with respect to a credit

2-